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Written by:
Numerics
Numerics
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Published on:
October 15, 2025
10/15/25
Note: The tax year 2026 adjustments described below generally apply to tax returns filed in 2027.
Income tax relief and deductions
Tax inflation adjustments
Standard deduction | Single; Married Filing Separately | Married Filing Jointly; Surviving Spouses | Head of Household |
|---|---|---|---|
TY 2025 under OBBB | $15,750 | $31,500 | $23,625 |
TY 2026 under OBBB | $16,100 | $32,200 | $24,150 |
Marginal Rates: For tax year 2026, the top tax rate remains 37% for individual single taxpayers with incomes greater than $640,600 and $768,700 for married couples filing jointly. The other rates are:
Tax Rate | Single Filers (Income Over) | Married Filing Jointly (Income Over) |
|---|---|---|
35% | $256,225 | $512,450 |
32% | $201,775 | $403,550 |
24% | $105,700 | $211,400 |
22% | $50,400 | $100,800 |
12% | $12,400 | $24,800 |
The lowest rate is 10% for incomes of single individuals with incomes of $12,400 or less and $24,800 for married couples filing jointly.
Alternative Minimum Tax (AMT): In 2026, the AMT exemption is $90,100 for single filers, and it starts to phase out once your income hits $500,000. For married couples filing jointly, the exemption is $140,200, with the phase-out starting at $1,000,000.
Estate Tax Exemption: If someone passes away in 2026, their estate can be excluded from federal estate taxes up to $15 million; an increase from $13.99 million in 2025.
Adoption Credits: Planning to adopt? In 2026, you can claim up to $17,670 in qualified adoption expenses (up from $17,280 in 2025). Of that amount, $5,120 may be refundable.
Employer-Provided Childcare Tax Credit: There’s a big boost here: Starting in 2026, employers can claim up to $500,000 in childcare tax credits; up from the previous $150,000. If the employer is a qualified small business, the cap rises to $600,000.
Earned Income Tax Credit (EITC): For 2026, the maximum EITC is $8,231 for taxpayers with three or more qualifying children; a small bump from $8,046 in 2025.
If you’re in a different category (fewer kids or none), the IRS will publish the full table in Revenue Procedure 2025-32, which includes phase-out thresholds and income limits.
Transportation Fringe Benefits: Commuting just got a little more tax friendly. The monthly limit for transit benefits and qualified parking goes up to $340 in 2026; an increase of $15 from 2025.
Health Flexible Spending Accounts (FSA): Starting in 2026, employees can contribute up to $3,400 to their health FSA through salary reductions; that’s a $100 increase from last year. And if your plan allows you to carry over unused funds into the next year, the maximum carryover has also gone up slightly to $680, which is $20 more than in 2025.
Medical Savings Accounts (MSA):
For self-only coverage: Deductible must be between $2,900 and $4,400 (up from $2,850–$4,300 in 2025). Max out-of-pocket costs are $5,850 (up $150).
For family coverage: Deductible must be between $5,850 and $8,750 (slightly higher than 2025). Max out-of-pocket expenses: $10,700 (up $200).
Foreign Earned Income Exclusion: If you're working abroad, you can exclude up to $132,900 of foreign income in 2026. That’s up from $130,000 in 2025.
Annual Exclusion for Gifts: The annual gift tax exclusion is held steady at $19,000 in 2026. However, if you're gifting to a non-citizen spouse, the exclusion increases to $194,000, up $4,000 from the previous year.
New Tip Deduction for 2025-2028: Up to $25,000
Starting in 2025, employees and self-employed individuals working in tipped occupations may qualify for a new tip income deduction, even if they don’t itemize.
Who Qualifies?
Workers in jobs recognized by the IRS as tip-based (as of Dec. 31, 2024)
Tips must be reported on a W-2, 1099, or via Form 4137
What Tips Count?
Only voluntary tips from customers (cash, card, or tip-sharing)
No service charges or automatic gratuities
How Much Can You Deduct?
Up to $25,000 per year
For the self-employed: deduction capped at net business income
Phase-out begins at $150,000 income for individuals and $300,000 for joint filers
Who Can’t Claim It?
Self-employed or employees in Specified Service Trades/Businesses (SSTBs) like law, consulting, or finance
Married individuals must file jointly to claim
Other Requirements:
Include Social Security number on your tax return
The IRS will provide transition relief for tax year 2025 for taxpayers claiming the deduction and for employers and payors subject to the new reporting requirements.
New Overtime Pay Deduction for 2025-2028
Starting in 2025, certain workers may be able to deduct a portion of their overtime pay; specifically, the extra pay earned above their regular hourly rate (like the “half” in time-and-a-half), as required by the Fair Labor Standards Act (FLSA).
Deduction Details:
Up to $12,500 annually for individuals and up to $25,000 for joint filers
Phases out at $150,000 income for individuals and $300,000 for joint filers
Who Qualifies?
Anyone receiving qualified overtime reported on a W-2, 1099, or similar statement
Available to both itemizers and non-itemizers
Must include Social Security number on the return and file jointly if married to claim the deduction
Employer Reporting: Employers (or other payors) must report overtime amounts to the IRS and provide workers with year-end statements.
The IRS will offer transition relief in 2025 to help taxpayers and employers adjust to the new rules.
Personal Car Loan Interest is Now Tax-Deductible
Beginning in 2025 and continuing through 2028, individuals may claim a new federal deduction for interest paid on loans used to purchase a qualified personal-use vehicle. (Lease payments are not eligible.)
Key highlights:
Maximum annual deduction: $10,000
Income phaseout: Begins at $100,000 (single) or $200,000 (joint) of modified adjusted gross income
Loan requirements:
Originated after December 31, 2024
Used to purchase a new (not previously owned) vehicle
Secured by a lien on the vehicle
Used for personal, non-business purposes
Interest on a refinanced qualifying loan generally remains eligible for the deduction.
Qualified vehicles: Include cars, SUVs, vans, pickups, and motorcycles with a gross vehicle weight under 14,000 pounds that underwent final assembly in the United States. Eligibility can be confirmed via:
The dealer’s vehicle information label
The Vehicle Identification Number (VIN)
The NHTSA VIN Decoder
Additional details:
Available to both itemizing and non-itemizing taxpayers.
The VIN must be reported on the tax return for any year the deduction is claimed.
Lenders and loan servicers will be required to issue annual statements reporting total interest received, with IRS transition relief available for the 2025 filing year.
New $6,000 Deduction for Seniors
Starting in 2025 and continuing through 2028, taxpayers age 65 and older will be eligible for a new $6,000 deduction, in addition to the existing senior standard deduction.
Key highlights:
Deduction amount: $6,000 per qualifying individual ($12,000 for a married couple if both are age 65 or older).
Income phaseout: Begins at $75,000 of modified adjusted gross income ($150,000 for joint filers).
Eligibility:
Taxpayer must be age 65 or older by the last day of the tax year.
Deduction is available to both itemizing and non-itemizing taxpayers.
Married taxpayers must file jointly to claim the deduction.
The Social Security number of each qualifying individual must be included on the return.
Investment and community development
Opportunity Zones Permanently Extended and Enhanced
Originally established in 2018, Qualified Opportunity Zones (QOZs) were created to spur investment in economically distressed communities across the U.S. and its territories. Investors in these zones benefit from favorable tax treatment designed to encourage long-term economic growth and job creation.
What’s new under the OBBB:
Permanent extension: The Opportunity Zone program has been made permanent, ensuring continued availability of these tax incentives.
Updated definition of “rural area”: A rural area now refers to any location outside a city or town with a population over 50,000, as well as areas contiguous to such cities or towns. This definition applies across all states, U.S. territories, and the District of Columbia.
Reduced improvement threshold: Beginning July 4, 2025, for property located entirely within a rural QOZ, the substantial improvement threshold—the required additions to a property’s basis—has been reduced from 100% to 50%, making it easier for investors to qualify for the associated tax benefits.
Clean energy
Expiring clean vehicle credits
New Clean Vehicle Credit: The credit will not be allowed for any vehicle acquired after September 30, 2025.
Used Clean Vehicle Credit: The credit will not be allowed with respect to any vehicle acquired after September 30, 2025.
Qualified Commercial Clean Vehicle Credit: The credit will not be allowed for any vehicle acquired after September 30, 2025.
Note: The tax year 2026 adjustments described below generally apply to tax returns filed in 2027.
Income tax relief and deductions
Tax inflation adjustments
Standard deduction | Single; Married Filing Separately | Married Filing Jointly; Surviving Spouses | Head of Household |
|---|---|---|---|
TY 2025 under OBBB | $15,750 | $31,500 | $23,625 |
TY 2026 under OBBB | $16,100 | $32,200 | $24,150 |
Marginal Rates: For tax year 2026, the top tax rate remains 37% for individual single taxpayers with incomes greater than $640,600 and $768,700 for married couples filing jointly. The other rates are:
Tax Rate | Single Filers (Income Over) | Married Filing Jointly (Income Over) |
|---|---|---|
35% | $256,225 | $512,450 |
32% | $201,775 | $403,550 |
24% | $105,700 | $211,400 |
22% | $50,400 | $100,800 |
12% | $12,400 | $24,800 |
The lowest rate is 10% for incomes of single individuals with incomes of $12,400 or less and $24,800 for married couples filing jointly.
Alternative Minimum Tax (AMT): In 2026, the AMT exemption is $90,100 for single filers, and it starts to phase out once your income hits $500,000. For married couples filing jointly, the exemption is $140,200, with the phase-out starting at $1,000,000.
Estate Tax Exemption: If someone passes away in 2026, their estate can be excluded from federal estate taxes up to $15 million; an increase from $13.99 million in 2025.
Adoption Credits: Planning to adopt? In 2026, you can claim up to $17,670 in qualified adoption expenses (up from $17,280 in 2025). Of that amount, $5,120 may be refundable.
Employer-Provided Childcare Tax Credit: There’s a big boost here: Starting in 2026, employers can claim up to $500,000 in childcare tax credits; up from the previous $150,000. If the employer is a qualified small business, the cap rises to $600,000.
Earned Income Tax Credit (EITC): For 2026, the maximum EITC is $8,231 for taxpayers with three or more qualifying children; a small bump from $8,046 in 2025.
If you’re in a different category (fewer kids or none), the IRS will publish the full table in Revenue Procedure 2025-32, which includes phase-out thresholds and income limits.
Transportation Fringe Benefits: Commuting just got a little more tax friendly. The monthly limit for transit benefits and qualified parking goes up to $340 in 2026; an increase of $15 from 2025.
Health Flexible Spending Accounts (FSA): Starting in 2026, employees can contribute up to $3,400 to their health FSA through salary reductions; that’s a $100 increase from last year. And if your plan allows you to carry over unused funds into the next year, the maximum carryover has also gone up slightly to $680, which is $20 more than in 2025.
Medical Savings Accounts (MSA):
For self-only coverage: Deductible must be between $2,900 and $4,400 (up from $2,850–$4,300 in 2025). Max out-of-pocket costs are $5,850 (up $150).
For family coverage: Deductible must be between $5,850 and $8,750 (slightly higher than 2025). Max out-of-pocket expenses: $10,700 (up $200).
Foreign Earned Income Exclusion: If you're working abroad, you can exclude up to $132,900 of foreign income in 2026. That’s up from $130,000 in 2025.
Annual Exclusion for Gifts: The annual gift tax exclusion is held steady at $19,000 in 2026. However, if you're gifting to a non-citizen spouse, the exclusion increases to $194,000, up $4,000 from the previous year.
New Tip Deduction for 2025-2028: Up to $25,000
Starting in 2025, employees and self-employed individuals working in tipped occupations may qualify for a new tip income deduction, even if they don’t itemize.
Who Qualifies?
Workers in jobs recognized by the IRS as tip-based (as of Dec. 31, 2024)
Tips must be reported on a W-2, 1099, or via Form 4137
What Tips Count?
Only voluntary tips from customers (cash, card, or tip-sharing)
No service charges or automatic gratuities
How Much Can You Deduct?
Up to $25,000 per year
For the self-employed: deduction capped at net business income
Phase-out begins at $150,000 income for individuals and $300,000 for joint filers
Who Can’t Claim It?
Self-employed or employees in Specified Service Trades/Businesses (SSTBs) like law, consulting, or finance
Married individuals must file jointly to claim
Other Requirements:
Include Social Security number on your tax return
The IRS will provide transition relief for tax year 2025 for taxpayers claiming the deduction and for employers and payors subject to the new reporting requirements.
New Overtime Pay Deduction for 2025-2028
Starting in 2025, certain workers may be able to deduct a portion of their overtime pay; specifically, the extra pay earned above their regular hourly rate (like the “half” in time-and-a-half), as required by the Fair Labor Standards Act (FLSA).
Deduction Details:
Up to $12,500 annually for individuals and up to $25,000 for joint filers
Phases out at $150,000 income for individuals and $300,000 for joint filers
Who Qualifies?
Anyone receiving qualified overtime reported on a W-2, 1099, or similar statement
Available to both itemizers and non-itemizers
Must include Social Security number on the return and file jointly if married to claim the deduction
Employer Reporting: Employers (or other payors) must report overtime amounts to the IRS and provide workers with year-end statements.
The IRS will offer transition relief in 2025 to help taxpayers and employers adjust to the new rules.
Personal Car Loan Interest is Now Tax-Deductible
Beginning in 2025 and continuing through 2028, individuals may claim a new federal deduction for interest paid on loans used to purchase a qualified personal-use vehicle. (Lease payments are not eligible.)
Key highlights:
Maximum annual deduction: $10,000
Income phaseout: Begins at $100,000 (single) or $200,000 (joint) of modified adjusted gross income
Loan requirements:
Originated after December 31, 2024
Used to purchase a new (not previously owned) vehicle
Secured by a lien on the vehicle
Used for personal, non-business purposes
Interest on a refinanced qualifying loan generally remains eligible for the deduction.
Qualified vehicles: Include cars, SUVs, vans, pickups, and motorcycles with a gross vehicle weight under 14,000 pounds that underwent final assembly in the United States. Eligibility can be confirmed via:
The dealer’s vehicle information label
The Vehicle Identification Number (VIN)
The NHTSA VIN Decoder
Additional details:
Available to both itemizing and non-itemizing taxpayers.
The VIN must be reported on the tax return for any year the deduction is claimed.
Lenders and loan servicers will be required to issue annual statements reporting total interest received, with IRS transition relief available for the 2025 filing year.
New $6,000 Deduction for Seniors
Starting in 2025 and continuing through 2028, taxpayers age 65 and older will be eligible for a new $6,000 deduction, in addition to the existing senior standard deduction.
Key highlights:
Deduction amount: $6,000 per qualifying individual ($12,000 for a married couple if both are age 65 or older).
Income phaseout: Begins at $75,000 of modified adjusted gross income ($150,000 for joint filers).
Eligibility:
Taxpayer must be age 65 or older by the last day of the tax year.
Deduction is available to both itemizing and non-itemizing taxpayers.
Married taxpayers must file jointly to claim the deduction.
The Social Security number of each qualifying individual must be included on the return.
Investment and community development
Opportunity Zones Permanently Extended and Enhanced
Originally established in 2018, Qualified Opportunity Zones (QOZs) were created to spur investment in economically distressed communities across the U.S. and its territories. Investors in these zones benefit from favorable tax treatment designed to encourage long-term economic growth and job creation.
What’s new under the OBBB:
Permanent extension: The Opportunity Zone program has been made permanent, ensuring continued availability of these tax incentives.
Updated definition of “rural area”: A rural area now refers to any location outside a city or town with a population over 50,000, as well as areas contiguous to such cities or towns. This definition applies across all states, U.S. territories, and the District of Columbia.
Reduced improvement threshold: Beginning July 4, 2025, for property located entirely within a rural QOZ, the substantial improvement threshold—the required additions to a property’s basis—has been reduced from 100% to 50%, making it easier for investors to qualify for the associated tax benefits.
Clean energy
Expiring clean vehicle credits
New Clean Vehicle Credit: The credit will not be allowed for any vehicle acquired after September 30, 2025.
Used Clean Vehicle Credit: The credit will not be allowed with respect to any vehicle acquired after September 30, 2025.
Qualified Commercial Clean Vehicle Credit: The credit will not be allowed for any vehicle acquired after September 30, 2025.
Note: The tax year 2026 adjustments described below generally apply to tax returns filed in 2027.
Income tax relief and deductions
Tax inflation adjustments
Standard deduction | Single; Married Filing Separately | Married Filing Jointly; Surviving Spouses | Head of Household |
|---|---|---|---|
TY 2025 under OBBB | $15,750 | $31,500 | $23,625 |
TY 2026 under OBBB | $16,100 | $32,200 | $24,150 |
Marginal Rates: For tax year 2026, the top tax rate remains 37% for individual single taxpayers with incomes greater than $640,600 and $768,700 for married couples filing jointly. The other rates are:
Tax Rate | Single Filers (Income Over) | Married Filing Jointly (Income Over) |
|---|---|---|
35% | $256,225 | $512,450 |
32% | $201,775 | $403,550 |
24% | $105,700 | $211,400 |
22% | $50,400 | $100,800 |
12% | $12,400 | $24,800 |
The lowest rate is 10% for incomes of single individuals with incomes of $12,400 or less and $24,800 for married couples filing jointly.
Alternative Minimum Tax (AMT): In 2026, the AMT exemption is $90,100 for single filers, and it starts to phase out once your income hits $500,000. For married couples filing jointly, the exemption is $140,200, with the phase-out starting at $1,000,000.
Estate Tax Exemption: If someone passes away in 2026, their estate can be excluded from federal estate taxes up to $15 million; an increase from $13.99 million in 2025.
Adoption Credits: Planning to adopt? In 2026, you can claim up to $17,670 in qualified adoption expenses (up from $17,280 in 2025). Of that amount, $5,120 may be refundable.
Employer-Provided Childcare Tax Credit: There’s a big boost here: Starting in 2026, employers can claim up to $500,000 in childcare tax credits; up from the previous $150,000. If the employer is a qualified small business, the cap rises to $600,000.
Earned Income Tax Credit (EITC): For 2026, the maximum EITC is $8,231 for taxpayers with three or more qualifying children; a small bump from $8,046 in 2025.
If you’re in a different category (fewer kids or none), the IRS will publish the full table in Revenue Procedure 2025-32, which includes phase-out thresholds and income limits.
Transportation Fringe Benefits: Commuting just got a little more tax friendly. The monthly limit for transit benefits and qualified parking goes up to $340 in 2026; an increase of $15 from 2025.
Health Flexible Spending Accounts (FSA): Starting in 2026, employees can contribute up to $3,400 to their health FSA through salary reductions; that’s a $100 increase from last year. And if your plan allows you to carry over unused funds into the next year, the maximum carryover has also gone up slightly to $680, which is $20 more than in 2025.
Medical Savings Accounts (MSA):
For self-only coverage: Deductible must be between $2,900 and $4,400 (up from $2,850–$4,300 in 2025). Max out-of-pocket costs are $5,850 (up $150).
For family coverage: Deductible must be between $5,850 and $8,750 (slightly higher than 2025). Max out-of-pocket expenses: $10,700 (up $200).
Foreign Earned Income Exclusion: If you're working abroad, you can exclude up to $132,900 of foreign income in 2026. That’s up from $130,000 in 2025.
Annual Exclusion for Gifts: The annual gift tax exclusion is held steady at $19,000 in 2026. However, if you're gifting to a non-citizen spouse, the exclusion increases to $194,000, up $4,000 from the previous year.
New Tip Deduction for 2025-2028: Up to $25,000
Starting in 2025, employees and self-employed individuals working in tipped occupations may qualify for a new tip income deduction, even if they don’t itemize.
Who Qualifies?
Workers in jobs recognized by the IRS as tip-based (as of Dec. 31, 2024)
Tips must be reported on a W-2, 1099, or via Form 4137
What Tips Count?
Only voluntary tips from customers (cash, card, or tip-sharing)
No service charges or automatic gratuities
How Much Can You Deduct?
Up to $25,000 per year
For the self-employed: deduction capped at net business income
Phase-out begins at $150,000 income for individuals and $300,000 for joint filers
Who Can’t Claim It?
Self-employed or employees in Specified Service Trades/Businesses (SSTBs) like law, consulting, or finance
Married individuals must file jointly to claim
Other Requirements:
Include Social Security number on your tax return
The IRS will provide transition relief for tax year 2025 for taxpayers claiming the deduction and for employers and payors subject to the new reporting requirements.
New Overtime Pay Deduction for 2025-2028
Starting in 2025, certain workers may be able to deduct a portion of their overtime pay; specifically, the extra pay earned above their regular hourly rate (like the “half” in time-and-a-half), as required by the Fair Labor Standards Act (FLSA).
Deduction Details:
Up to $12,500 annually for individuals and up to $25,000 for joint filers
Phases out at $150,000 income for individuals and $300,000 for joint filers
Who Qualifies?
Anyone receiving qualified overtime reported on a W-2, 1099, or similar statement
Available to both itemizers and non-itemizers
Must include Social Security number on the return and file jointly if married to claim the deduction
Employer Reporting: Employers (or other payors) must report overtime amounts to the IRS and provide workers with year-end statements.
The IRS will offer transition relief in 2025 to help taxpayers and employers adjust to the new rules.
Personal Car Loan Interest is Now Tax-Deductible
Beginning in 2025 and continuing through 2028, individuals may claim a new federal deduction for interest paid on loans used to purchase a qualified personal-use vehicle. (Lease payments are not eligible.)
Key highlights:
Maximum annual deduction: $10,000
Income phaseout: Begins at $100,000 (single) or $200,000 (joint) of modified adjusted gross income
Loan requirements:
Originated after December 31, 2024
Used to purchase a new (not previously owned) vehicle
Secured by a lien on the vehicle
Used for personal, non-business purposes
Interest on a refinanced qualifying loan generally remains eligible for the deduction.
Qualified vehicles: Include cars, SUVs, vans, pickups, and motorcycles with a gross vehicle weight under 14,000 pounds that underwent final assembly in the United States. Eligibility can be confirmed via:
The dealer’s vehicle information label
The Vehicle Identification Number (VIN)
The NHTSA VIN Decoder
Additional details:
Available to both itemizing and non-itemizing taxpayers.
The VIN must be reported on the tax return for any year the deduction is claimed.
Lenders and loan servicers will be required to issue annual statements reporting total interest received, with IRS transition relief available for the 2025 filing year.
New $6,000 Deduction for Seniors
Starting in 2025 and continuing through 2028, taxpayers age 65 and older will be eligible for a new $6,000 deduction, in addition to the existing senior standard deduction.
Key highlights:
Deduction amount: $6,000 per qualifying individual ($12,000 for a married couple if both are age 65 or older).
Income phaseout: Begins at $75,000 of modified adjusted gross income ($150,000 for joint filers).
Eligibility:
Taxpayer must be age 65 or older by the last day of the tax year.
Deduction is available to both itemizing and non-itemizing taxpayers.
Married taxpayers must file jointly to claim the deduction.
The Social Security number of each qualifying individual must be included on the return.
Investment and community development
Opportunity Zones Permanently Extended and Enhanced
Originally established in 2018, Qualified Opportunity Zones (QOZs) were created to spur investment in economically distressed communities across the U.S. and its territories. Investors in these zones benefit from favorable tax treatment designed to encourage long-term economic growth and job creation.
What’s new under the OBBB:
Permanent extension: The Opportunity Zone program has been made permanent, ensuring continued availability of these tax incentives.
Updated definition of “rural area”: A rural area now refers to any location outside a city or town with a population over 50,000, as well as areas contiguous to such cities or towns. This definition applies across all states, U.S. territories, and the District of Columbia.
Reduced improvement threshold: Beginning July 4, 2025, for property located entirely within a rural QOZ, the substantial improvement threshold—the required additions to a property’s basis—has been reduced from 100% to 50%, making it easier for investors to qualify for the associated tax benefits.
Clean energy
Expiring clean vehicle credits
New Clean Vehicle Credit: The credit will not be allowed for any vehicle acquired after September 30, 2025.
Used Clean Vehicle Credit: The credit will not be allowed with respect to any vehicle acquired after September 30, 2025.
Qualified Commercial Clean Vehicle Credit: The credit will not be allowed for any vehicle acquired after September 30, 2025.
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